Top Sites to Watch At $38 per user (the average for recent deals), popular blogs and social-networking sites look like hot properties. Of course, many factors, including growth prospects and brand equity, can also affect acquisition prices. Company Valuation Estimate Open Source Technology Group* (owner of Slashdot) $155 million Facebook $127 million Drudge Report $120 million Gawker Media $76 million Boing Boing $34 million *Subsidiary of VA Software

NEW YORK (Business 2.0) - In a big about-face since the dot.com bust, selling online "eyeballs" is back in vogue.

The idea that Web traffic could be converted into ad dollars -- that "eyeballs" could be monetized -- led to some of the most overpriced acquisitions of the dot.com era. Remember when ExciteAtHome paid $780 million for BlueMountain.com, the online greeting company with 11 million monthly visitors and negligible revenues?

But now a new wave of deals -- from Dow Jones's (Research) $519 million acquisition of MarketWatch a year ago to America Online's recent purchase of Weblogs Inc. for a reported $25 million to Google agreeing to buy a 5 percent take in AOL for $1 billion -- all signal that Internet content is hot again.

Fueling the rebound is the resurgent online ad market, which once again makes Web traffic a prized commodity. This time around, however, investors and acquirers are tempering valuations based on lessons learned. Here's why eyeballs are worth money, and what it takes to cash in on them.

Back in 2000, every entrepreneur who started a Web content company carried the same PowerPoint slide. It charted the astounding growth of U.S. online advertising, from next to nothing in 1995 to $6 billion in 1999.

Then a dotted line shot up to the projection for 2005 -- typically the $16.5 billion figure supplied by New York-based research firm Jupiter Communications. If a Web site could just attract visitors, the slide argued, advertising dollars would follow.

Venture capitalists and big portals bought in, placing sky-high valuations on sites that promised large audiences. Of course, the market for traffic dried up as online advertising slumped from $8.2 billion in 2001 to $6 billion in 2002.

But Web content deals are on the rise again, and Internet ad spending should reach $12 billion this year.

With nearly 38 million broadband connections in the United States, consumers now spend three hours a day online compared with 1.7 hours watching television, according to a Stanford University study. Meanwhile, Forrester Research predicts greater than 12 percent annual growth in Web ad spending between now and 2010.

And with companies like Ford (Research), McDonald's (Research), and Procter & Gamble (Research) announcing plans to do more Internet advertising, content giants are eager to buy audiences.

In the past year, the New York Times Co. (Research) paid $410 million for About.com, InterActiveCorp (Research) acquired Ask Jeeves for $1.9 billion, and News Corp. (Research) bought the parent company of MySpace for $580 million.

"Media companies are hearing from advertisers who want to spend more on the Internet," says Shelby Bonnie, CEO of San Francisco-based CNET (Research), which earlier this year paid $22 million for four small Web sites.

Based on recent high-profile Web content deals, the value of a unique monthly Web site visitor currently hovers around $38 -- the average purchase price per unique user in acquisitions over the past year.

As a result, those who built popular Web sites over the last few years look prescient: They "bought" eyeballs when the market placed little value on them and can now sell their traffic at a markup.

Of course, there are new metrics for valuing audiences.

"Not all page views are created equal," cautions David Hornik, a partner at venture capital firm August Capital. Hornik and other VCs say the most prized traffic comes from sites that leverage content using Internet buzz to acquire users who are intensely loyal.

And according to Weblogs Inc. co-founder Jason Calacanis, the most valuable online media companies are those that are already generating revenue. "Concentrate on selling ads from day one," Calacanis advises. "And build a brand. Because without that, you're going nowhere."

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